Kremlin Valley gets a £2.35 billion boost until 2020

Since its inception in 2010, the Skolkovo Foundation has faced criticism and
accusations of money mismanagement and fraud, but its worst days may be
behind it after a recent cash boost from the Russian Government.

Russia is looking to California for inspiration in how it plans to grow its tech industry
Photo: Alamy

The recent relationship between the US and Russia has been defined by their reaction to the Syrian crisis, but elsewhere cooperation between the two countries is markedly more uplifting.

This week Russian Innovation Week is taking place in the US, an invitation-only event that fosters American-Russian networking, innovation and development.

So-called elite representatives from government and business are meeting in Boston and Silicon Valley to look at the benefits of working together in the markets of cleantech, biotech, pharmaceuticals, life sciences, nanotechnology, and IT.

The events arranged for Silicon Valley this week emphasise how Russia, and in particular the city of Moscow, is looking to California for inspiration in how it plans to grow its incipient tech cluster, centred on the work of the Skolkovo Foundation.

The not-for-profit foundation was set up in 2009 and founded the next year with the express intention to position Moscow as an entrepreneur-friendly location, defined by a new city built on the edge of Moscow that would have its own laws and be home to 25,000 workers and a vast number of startup companies. In less than four years it has become home to nearly 1,000 startups and created 12,000 hi-tech jobs.

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The intention to build ‘Kremlin Valley’ based on the success of Silicon Valley is another milestone for Russia to become the global country of this decade. Its upcoming stewardship of the 2014 Winter Olympics and 2018 football World Cup are its opportunity to reinforce Russia’s friendly face to the rest of the world.

But things haven’t gone smoothly. Perceived differences between Prime Minister Medvedev, who launched the foundation when he was President in 2009 (between the two Presidential terms of Vladimir Putin) and now-President Putin have seen the project dogged by rumours and accusations of money laundering, fraud and financial incompetence.

Such accusations were never simple and may have been based more on Kremlinology than actual mismanagement, but the reality was that its Moscow head office was raided in April to investigate the alleged theft of 24 million Roubles (almost £500,000).

But better days seem to be at hand for the organisation. In July Vladimir Khokhlov, the Skolkovo official accused for embezzling those 24 million Roubles from federal budget funds, was cleared of all charges and reinstated.

It also appears that the Russian Government, after a period of analysis and investigation, has decided to put its weight behind the project. It recently announced that it was pledging 2.8 billion Euros (£2.35 billion) to support Skolkovo until 2020, an order that was personally signed by Prime Minister Medvedev, and endorsed by President Putin.

Skolkovo also announced at the same time more news about investments in the project from VCs and investors. According to the foundation, there have already been $43.1 million (£26 million) of investments in the first eight months of 2013, 300% up for the same period in 2012.

“The Skolkovo innovation centre is our ‘St. Petersburg of the 21st century’. It’s a first step Russia has taken in this direction. This institute founded by the Russian government is the window and at the same time the core of our new innovation policy," said Viktor Vekselberg, President of the Skolkovo Foundation.

“It is an experimental ground where science, young entrepreneurs and companies from many countries are developing new ideas, solutions and business models together. It is a leading Russian think tank and also a global research hub with links to leading academic institutions all over the world."

The previous travails of the Skolkovo are by no means over; a country of great technological expertise with little legacy of marketing, distribution or even capitalism will take time to find its feet; but the project now has legs.

It has seven years of guaranteed funding and the global spotlight of next year’s Winter Olympics and the football World Cup four years later means Russia itself will be in the spotlight. In that time it has to deliver; it will be interesting to see if it can.